CARES Act (Coronavirus Aid, Relief, and Economic Security) (Continued)
- Paycheck Protection Plan (PPP) loan forgiveness
Taxpayers may exclude from gross income any covered loan forgiveness.
IRS Notice 2020-32 clarifies that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to the CARES Act, and the income associated with the forgiveness is excluded from gross income pursuant to the CARES Act.
- Special rules for use of retirement funds
Individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020. These coronavirus-related withdrawals:
- May be included in taxable income either over a three-year period or in the year taken.
- Are not subject to the 10% additional tax on early distributions that would otherwise apply to most withdrawals before age 59½,
- Are not subject to mandatory tax withholding, and
- May be repaid to an IRA or workplace retirement plan within three years.
As expanded under Notice 2020-50 a qualified individual is anyone who:
- is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, “COVID-19”) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or
- experiences adverse financial consequences as a result of the individual, the individual’s spouse, or a member of the individual’s household (that is, someone who shares the individual’s principal residence): being quarantined, being furloughed or laid off, or
- having work hours reduced due to COVID-19;
- being unable to work due to lack of childcare due to COVID-19;
- closing or reducing hours of a business that they own or operate due to COVID-19;
- having a job offer rescinded or start date for a job delayed due to COVID-19.
These benefits are claimed on new Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments.